Who exactly is Rachel Maddow anyway? How did she get a show on MSNBC? A quick glance at her bio shows, let’s see, no journalistic credentials whatsoever. This comes as no surprise. And yet, considering that she has a Stanford degree in public policy, a Doctorate in Philosophy from Oxford, and (holy cats!) was a Rhodes Scholar, you’d think she might demonstrate those smarts by not making herself look like a total moron.
I’m talking about her screed against payday lenders. Never mind the usual blather about being “legal loan sharks”. Obviously, had the esteemed Dr. Maddow taken an elective class in economics, she’d realize that payday lenders fill a vital role in providing short-term credit to those in need, and what would happen if they didn’t exist. However, the fact that she failed to point these facts out reveal her weak journalistic skills. Oh, but I forgot, she isn’t a journalist. She’s another academic who should know better.
The sanctimonious conclusion to her hit piece, however, is particularly revelatory. She calls payday loan business model, “usury,” and demonstrates her spelling acumen by putting the correct five letters in the correct order, telling us that “it’s in the dictionary, and actually, also in the Bible.”
Alas, Dr. Maddow manages to demonstrate exactly why she isn’t a journalist. If she were, she’d be able to actually look up the real definition of “usury” in the dictionary while properly interpreting the Biblical passages that refer to it. Then she’d find they have no application to the issue and work an actual balanced story around it.
Here’s the definition of usury from a random Google search:
An exorbitant or unlawful rate of interest.
Let’s take “unlawful” first. States that permit payday loans also specify the maximum allowable fee and/or interest by statute. As long as a payday lender makes a loan within those amounts, the loans are lawful and therefore not usurious. And they do.
Let’s define “exorbitant,” per the same dictionary:
Greatly exceeding bounds of reason or moderation.
We must ask what “reasonable” means in the world of short-term unsecured credit.
If a lender charges a price he deems reasonable that the borrower thinks is unreasonable, the borrower will not take out the loan. If the borrower wants a price he deems reasonable that the lender thinks is unreasonable, the lender will not make the loan.
So what is “reasonable”?
It’s obvious. Ready? Here’s the earth-shaking news: we define “reasonable” to mean “that price that both the lender and borrower agree upon so that a transaction occurs.” Most call this “the free market.” Since hundreds of millions of transactions have occurred in payday loan stores across the nation, both sides must obviously think the transaction is reasonably priced, or they wouldn’t undertake it, per the analysis above.
Therefore, the interest rate is reasonable, and therefore not exorbitant.
Thus, we see that payday loan rates are not usurious because the rate of interest is both lawful and not exorbitant.
Secular usury claim debunked, Dr. Maddow. It is in the dictionary. You got that part right.
It is also in the Bible, but not anywhere close to the way Dr. Maddow thinks it does. We look to Nehemiah for what most people speak of when they mention usury.
Paraphrasing, Nehemiah, Governor of Judah, had compassion for the Hebrew people who had returned to Jerusalem from Babylonian captivity. They were a crushed people. Nehemiah defended and protected them. After learning they were forced to borrow money on their fields and vineyards to pay the King’s tax, he was outraged. He brought charges against the nobles, saying, “The thing that you are doing is not good,” (5:9). “Let us stop this taking of interest,” (5:10), He persuaded them to restore all that they had exacted from their people.
The myopic and incorrect interpretation of Nehemiah 5, as provided by the Doctor of Theology Rachel Maddow, is that it fails to place blame where it is due – on the King. The Jews were oppressed due to the taxes they had to pay the King, not due to the interest they were being charged!
The parable here is that the Jews were truly powerless and starving, while being charged interest on loans for the fields where they worked their food. In this particular scenario, I’d say (as Nehemiah did), that this practice was indeed taking advantage of the poor.
However, much as Rev. Maddow wishes an analogy exists between the parable of Nehemiah and payday loans, none exists. Payday loans, when used and offered responsibly, don’t take advantage of anyone. They help people bridge financial gaps.
When used irresponsibly, the fault lies with the borrower, unless the loan was made irresponsibly. In that case, the lender bears responsibility as well, but not all of it.
Any lender who makes a loan to someone truly poverty-stricken, who already owes other lenders and/or does not have any chance to repay the loan, is being irresponsible. But since 94% of all payday loans are paid back on time, I’d say that situation rarely exists in the payday lending space. What lender wants to make a loan to someone if they don’t have a reasonable expectation of getting their principle back?
So why not just leave it up to consumers to decide what to do, Sister Maddow? I mean, why not at least mention it in your program?
Maybe because the non-journalist in her doesn’t feel required to actually present a balanced presentation. After all, she is a Rhodes Scholar.